Ethereum is due a correction, but will it have to wait
Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be considered investment advice
Ethereum has been within a respectable uptrend over the past couple of months. Presently trading above the 100% Fibonacci Level of its July low, ETH seems to be targeting some crucial milestones at $5,000, $6,000, and the 200% Fibonacci Level at $7,058.
Before these long-term targets are met, it’s worth noting that ETH is due a near-term correction. An overbought RSI and a possible triple top along the MACD suggested an incoming wave of selling pressure.
However, ETH can be expected to touch $5,000, before a drawdown is witnessed.
Ethereum 4-hour Chart
Since flipping its bottom trendline on 1 October, Ethereum got the ball rolling on an unshakeable rally, one which peaked at its press time level of $4,731. Following several correctional phases, ETH tagged its bottom trendline on three occasions while maintaining its streak of higher lows.
Now, since bullish momentum is still building on the Squeeze Momentum Indicator, ETH could extend gains all the way to $5,000 during its current upcycle. However, a correction can be expected thereon.
This, largely due to the fact that its hourly, 4-hour, and daily RSI were at overbought levels. In fact, three out of the last 4 occasions resulted in drawdowns whenever the 4-hour RSI touched this upper territory.
From there, support found anywhere above or at the 100% Fibonacci level would allow ETH to maintain its uptrend while hunting for newer milestones.
Now, the Squeeze Momentum Indicator registered a series of green bars within a volatile market. The MACD was also in the process of forming another peak on the back of a bullish crossover. These signs seemed to pave the way for some more gains before a correction sets in.
However, investors would eventually react to an overbought RSI and cash in their gains. A triple top along the MACD would also present lucrative sell signals.
Ethereum can be expected to tag $5,000 before the next wave of corrections hits the market. Should bulls push above this mark convincingly, ETH could even tag its 123.6% Fibonacci level.
Once a drawdown is initiated, the focus should be on a few defensive regions along the lower trendline. The near-term support was available at $4,544 and at $4,388.